Stock Code：002607 Stock Abbr.：OFFCN EDU Announcement No.:2021-018
Offcn Education Technology Co., Ltd.2020 Annual Report Summary
I. Important Information
This summary is extracted from the full annual report. In order to fully understand the Company's operating results,financial status and future development plans, investors should read the full annual report carefully disclosed on themedia designated by the China Securities Regulatory Commission (CSRC). The Company’s 2020 Annual Report isprepared and published in Chinese version, and the English version is for reference only. Should there be anyinconsistency between the Chinese version and English version, the Chinese version shall prevail.The Company’s Board of Directors, Supervisory Committee, directors, supervisors, and senior management herebyguarantee that the contents of the Annual Report are true, accurate, and complete, and that there are nomisrepresentations, misleading statements, or material omissions, and shall assume individual and joint legalliabilities.All directors have attended the board meeting for reviewing this report.Notes of non-standard audit opinion
□ Applicable √ Not Applicable
The plan of the common stock profit distribution or the plan of increasing share capital by converting capitalreserves during the reporting period reviewed by the board meeting
□ Applicable √ Not Applicable
The Company plans not to distribute cash dividends, bonus shares, nor to increase share capital by convertingcapital reserves.The plan of the preferred stock profit distribution during the reporting period approved by the board meeting
□ Applicable √ Not Applicable
II. Basic Information about the Company
1.Company profile
| Stock Abbreviation | OFFCN EDU | Stock Code | 002607 | |
| Listed Stock Exchange | Shenzhen Stock Exchange | |||
| Contact Person | Board Secretary | Securities Affairs Representative | ||
| Name | Gui Hongzhi | Gu Pan | ||
| Address | Block B, Hanhua Century Mansion, No.23 Xueqing Road, Haidian District, Beijing | Block B, Hanhua Century Mansion, No.23 Xueqing Road, Haidian District, Beijing | ||
| Tel. | 010-83433677 | 010-83433677 | ||
| ir@offcn.com | ir@offcn.com | |||
2.The Company’s main business and products during the reporting period
(1)Brief introduction to the main business or products and the business model in the reporting periodOffcn Education is a leading full-category vocational education institution in China, and it is also the pioneer andleader in the field of public service recruitment examination training. The Company bravely undertakes the missionof the times, continues to create new markets, and serves the society with friendliness and altruism.For hundreds of millions of knowledge-based people, the Company's main business covers three major sectorsincluding enrollment examination training, academic qualification preparation and vocational ability training, and itprovides more than 100 categories of comprehensive vocational training services. The Company has more than1,600 outlets across the country, covering more than 300 prefecture-level cities, and is rapidly expanding intothousands of counties and universities.Offcn Education mainly serves knowledge-based employment population including college students, universitygraduates, and various professionals, aged 18 to 45. This huge group of hundreds of millions of people is spreadthroughout the country, cities and towns at all levels and in all walks of life. Employment and vocational abilityimprovement are their two core demands.Vocational ability determines labor productivity which is the key to China's success in overcoming the “middleincome trap”. And employment is not only a barometer of economic growth, but also a fulcrum of the entirevocational education. It is also the ultimate arena for vocational education institutions.For this reason, the vocational education institutions that can get closer to the employment needs in the largest scopeand to the greatest extent can get more opportunities to turn the flywheel of multi-category growth and can becomea dominator in the overall vocational education field.After a long term exploration and accumulation, Offcn Education has owned a large-scale full-time R&D team ofmore than 3,000 people, a large-scale teaching team of more than 18,000 teachers, and a staff of more than 45,000people. Relying on outstanding team execution and nationwide vertical integration and rapid response capabilities,the Company has developed into an innovation-driven high-growth enterprise platform.
2. Overview of the industry and business environment in 2020
(1) Greater progress has been made in education equity, and the "14th Five-Year Plan" has established newtargets for investment in public services such as education and medical care.After the NPC&CPPCC Annual Sessions, the reform of high school entrance examination featured by key highschools admission quotas for graduates from non-key middle schools has been carried out across the country. It isanother significant measure for education equality following the previous reforms of multi-school division in oneneighbourhood, equal recruitment from public and private schools, and randomized enrollment in the field ofprimary and middle school enrollments. With the return of basic education to its nature of public products, thisround of reforms will greatly promote the expansion of teacher recruitment and teacher qualification certificateexaminations.The “14th Five-Year Plan”requires education equality and quality to be greatly improved, higher education to bepopularized, and more than 60 million new jobs to be created in cities and towns. In addition, 20,000 kindergartenswill be built, renovated and expanded in order to increase enrollments by over 4 million for ordinary families. Andmore than 4,000 primary and secondary schools will be newly built, renovated and expanded.In terms of medical and health care, on the one hand, it is necessary to expand disease prevention and control basesand build national and regional medical centers. On the other hand, it is necessary to strive to upgrade 500county-level hospitals to meet the facilities and service capabilities of top-tier hospitals.In terms of elderly care services, 500 districts and counties will be supported in building a model community homeelderly care service network, about 300 training and convalescent institutions will be supported in transformationinto inclusive elderly care institutions, and more nursing beds will be provided for about 1,000 public elderly careinstitutions.In terms of childcare services, 150 cities will be supported to develop childcare services with social resource, andmore than 500,000 exemplary inclusive childcare enrollments will be added.In summary, the “14th Five-Year Plan” will further accelerate investment in public services and further quantify theindicators, which will strongly promote the sustainable growth of the recruitment sectors, especially teachers,medical and community services.
(2) The pandemic has accelerated the elimination of industries, and large leading companies have furtherpromoted the demand growth.For a long time, the vocational education industry has been filled with small and scattered companies and the marketcompetition is in chaos. On the one hand, the supply of cost-effective and high-quality education products isseverely insufficient, which depresses demand, but on the other hand, there is a serious excess of homogenizedproduction capacity and cutthroat competition is widespread. Only large enterprises can break through thedifficulties and obstacles caused by the extreme fragmentation of the market. Through sufficient investment in corebusiness such as teaching and research, channels, and management, brand-new and cost-effective products can becreated, and huge potential demand can be dug out. By expanding business into various sectors and pushing eachsector forward, a vocational education market field valued of tens of billions can be created. This trend has initiallytaken shape over the past few years, and the outbreak of Covid-19 has greatly accelerated the evolution of the trend,which is conducive for leading companies to faster market development.
(3) Main industry characteristics and cyclical characteristics
The industry of vocational education distributes vastly all over the country and demonstrates a significantlong-tail effect. Different from both the K12 tutoring industry and English language training industry which areconcentrated in big cities, the demand of vocational education distributes vastly in every province and every city,especially in the prefecture-level cities and the counties. Almost every county has a vocational high school, andevery prefecture-level city has vocational colleges. The recruitment demand of public employers fromprefecture-level cities and counties also occupies a large proportion, which stimulates lots of local small traininginstitutions to get into the market and provides a wide space for the large scale players to expand their network ofchannels. Meanwhile, the nation-wide operation adds more difficulties to management on one hand, and lifts thebarriers to competition on the other hand.The training for public services recruitment test is seasonal. For students, the 1-2 years before or aftergraduation are the key period to take training classes for the recruitment tests.The national civil servant test takes place once a year, and the provincial examinations for each province arebasically once a year. Many provincial examinations take place in the first half of the year, while quite a fewprovinces choose to recruit civil servants in the second half. The recruitment of public institution employees andteachers are carried out according to the needs of the provinces and cities, which are evenly distributed in eachmonth throughout the year. The documents of recruitment plan are of a great amount and the number of examsamounts to tens of thousands.This seasonal fluctuation of recruitment has caused major growth bottlenecks for small and medium-sized trainingcompanies and motivated large enterprises to constantly challenge the scale boundary continuously. With the rapidincrease in examination categories and business sectors, large enterprises will increasingly enjoy the results of scaleeffects and obtain a more sound resource allocation structure. In recent years, the momentum of recruitmentexaminations has switched to new areas such as public institutions, teachers and comprehensive recruitment,bringing the rapid concentration of market share into leading enterprises.
3.Key Accounting Data and Financial Indicators
(1) Key accounting data and financial indicators in the recent three years
Whether the Company needs to adjust its financial information retrospectively or restate its previous yearaccounting information
□ Yes √ No
Unit: RMB
| Year 2020 | Year 2019 | Increase/Decrease over the previous year | Year 2018 | |
| Operating income (RMB) | 11,202,494,295.04 | 9,176,129,995.89 | 22.08% | 6,236,987,812.57 |
| Net profit attributable to shareholders of the listed Company (RMB) | 2,304,357,742.74 | 1,804,548,688.01 | 27.70% | 1,152,887,416.22 |
| Net profit after deducting non-recurring profits and losses attributable to shareholders of the listed Company (RMB) | 1,867,289,479.85 | 1,700,369,663.16 | 9.82% | 1,112,879,085.16 |
| Net cash flow from operating activities (RMB) | 4,882,469,101.91 | 2,473,986,085.19 | 97.35% | 1,407,946,376.93 |
| Basic earnings per share (RMB/share) | 0.37 | 0.29 | 27.59% | 0.22 |
| Diluted earnings per share (RMB/share) | 0.37 | 0.29 | 27.59% | 0.22 |
| Weighted average return on net assets | 66.15% | 60.71% | 5.44% | 71.89% |
| Year End 2020 | Year End 2019 | Increase/Decrease Over Previous Year End | Year End 2018 | |
| Total assets (RMB) | 14,418,850,027.27 | 9,960,705,427.94 | 44.76% | 7,202,071,521.23 |
| Net assets attributable to shareholders of the listed Company (RMB) | 4,275,127,793.20 | 3,431,545,903.82 | 24.58% | 2,953,951,905.00 |
(2) Quarterly key accounting data
Unit: RMB
| The First Quarter | The Second Quarter | The Third Quarter | The Fourth Quarter | |
| Operating income | 1,230,102,270.48 | 1,577,878,210.12 | 4,630,989,349.21 | 3,763,524,465.23 |
| Net profit attributable to shareholders of the listed Company | 116,303,799.91 | -349,330,445.07 | 1,553,920,155.49 | 983,464,232.41 |
| Net profit after deducting non-recurring profits and losses attributable to shareholders of the listed Company | 77,685,654.82 | -445,228,037.65 | 1,445,848,093.32 | 788,983,769.36 |
| Net cash flow from operating activities | 2,564,218,312.85 | 1,499,457,191.34 | 2,654,154,595.86 | -1,835,360,998.14 |
Do the above financial indicators or their total differ significantly from those disclosed in the Company’s quarterlyand semi-annual reports?
□ Yes √ No
4.Share capital and shareholders
(1)Number of ordinary shareholders, preferred shareholders with voting rights restored, and shareholdingsof the top 10 shareholders
Unit: Share(s)
| Total number of ordinary shareholders at the end of the reporting period | 41,625 | Total number of ordinary shareholders at the end of the previous month before the disclosure of the annual report | 57,045 | Total number of preferred shareholders with voting rights restored at the end of the reporting period | 0 | Total number of preferred shareholders with voting rights restored at the end of the previous month before the disclosure of the annual report | 0 | ||
| Shareholding of the top 10 shareholders | |||||||||
| Shareholder name | Nature of shareholders | Shareholding ratio | Number of shares | Number of shares with limited sale conditions | Pledge or freeze situation | ||||
| Share status | Quantity | ||||||||
| Lu Zhongfang | Domestic natural person | 41.36% | 2,550,549,260 | 2,550,549,260 | Pledged | 450,000,000 | |||
| Li Yongxin | Domestic natural person | 18.35% | 1,131,415,121 | 1,131,415,121 | Pledged | 774,495,000 | |||
| Wang Zhendong | Domestic natural person | 15.61% | 962,471,418 | 962,471,418 | Pledged | 140,764,011 | |||
| Beijing Aerospace Industry Investment Fund | Domestic non-state- owned legal | 4.33% | 267,353,171 | 267,353,171 | |||||
| (Limited Partnership) | person | |||||
| Beijing Guangyin Venture Capital Center (Limited Partnership) | Domestic non-state- owned legal person | 2.89% | 178,235,447 | 178,235,447 | ||
| Hong Kong Securities Clearing Co.,Ltd. | Overseas legal person | 1.93% | 119,248,789 | 0 | ||
| Beijing Kerui Technology Innovation Investment Center (Limited Partnership) | Domestic non-state- owned legal person | 1.44% | 89,117,723 | 89,117,723 | ||
| Beijing Offcn Future Information Consulting Center (Limited Partnership) | Domestic non-state- owned legal person | 1.30% | 80,000,000 | 0 | ||
| Zhou Xiayun | Domestic natural Person | 1.28% | 78,848,640 | 0 | Pledged | 43,448,845 |
| Zhou Hui | Domestic natural Person | 1.17% | 72,277,920 | 0 | Pledged | 11,050,000 |
| Description of the above-mentioned shareholders' connected relationship or concerted action | The Company's controlling shareholder and actual controller Lu Zhongfang and Li Yongxin are in a parent-child relationship. Lu Zhongfang, Li Yongxin, and Beijing Offcn Future Information Consulting Center (Limited Partnership) constitute persons acting in concert. Zhou Xiayun and Zhou Hui have a father-son relationship. It is unknown whether there is an associated relationship among the above-mentioned other shareholders, and whether the above-mentioned shareholders belong to the parties acting in concert as stipulated in the Administrative Measures on Disclosure of Information of Shareholding Changes in Listed Companies. | |||||
| Explanation on the participation of the shareholders in margin trading and securities lending business (if any) | None | |||||
(2)Number of preferred shareholders and shareholdings of the top 10 preferred shareholders
□ Applicable √ Not applicable
There are no shareholdings of preferred shareholders in the Company during the reporting period.
(3)Block diagram of the property rights and control relationship between the Company and the actualcontroller
5.Corporate bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were not due or werenot be redeemed in full on the date of approval of the annual reportNoneIII. Management Discussion and Analysis of Business Operation
1.Brief introduction on business operation during the reporting period
2020 is a turbulent year. The sudden outbreak of Covid-19 has severely disrupted and adversely affected thebusiness of the whole year. After arduous efforts, the Company has maintained steady development and continued tomaintain its market leadership and potential for expansion.Over the past three years, despite the institutional reforms and the pandemic, the Company has achieved steadygrowth in performance and business scale, systematically improved the comprehensive service level for students,and continued to maintain its leading edge in the industry. With the continuous expansion of business scale, theCompany seized the opportunity to fully invest in and upgrade human resources management, outlets channels andteaching facilities. Abundant forward-looking investments were specially made for new types of recruitment,postgraduate entrance examination, college and high institution enrollment examination, vocational ability trainingand other key new businesses. The output effect from investments in these core business resources will become animportant support for the next stage of development.
(1)Though the pandemic strongly disturbs the pace of recruitment, the Company, with prominent executionability, overcomes difficulties with steady development.In early 2020, the market fluctuation caused by government institutional reform came to end and the recruitmentdemands rebounded again. But the sudden outbreak of Covid-19 strongly disturbed the rhythm of recruitment.Specifically, on the one hand, the recruitment in the first half of the year was almost frozen, and the daily operationand teaching could not proceed normally; on the other hand, the civil servant joint examination was postponed to thethird quarter, which seriously squeezed the preparation time for recruitment and enrollment examinations of othersectors, resulting in a substantial shrink in recruitment of teachers and medical workers. And the recruitment andexamination preparation for public institutions category and etc., were also disturbed.With strong corporate platform capabilities and prominent team execution, the Company’s performance hasmaintained steady and rapid growth. During the reporting period, the Company achieved a total operating income ofRMB 11,202,494,295.04, an increase of 22.08% on year-on-year basis; net profit attributable to shareholders of thelisted Company was RMB 2,304,357,742.74, an increase of 27.70% over the same period of the previous year. Afterdeducting non-recurring profits and losses, net profit attributable to the parent company’s shareholders wasRMB1,867,289,479.85, an increase of 9.82% on an annual basis.The key operating resources and performance indicators in 2020 are stated in the table below:
| Item | Indicators | At the end of the reporting period | At the end of last year | Year-on-year change |
| Operating resources | Directly operated branches | 1,669 | 1,104 | 51.18% |
| Employees | 45,066 | 35,209 | 28.0% | |
| R&D personnel | 3,025 | 2,051 | 47.49% | |
| Teaching professionals | 18,863 | 13,475 | 39.99% |
| Business | Trainees | 4,494,348 | 3,287,356 | 36.72% |
| Revenue of face-to-face training (RMB) | 8,233,444,798.58 | 8,083,730,102.79 | 1.85% | |
| Revenue of online training (RMB) | 2,905,456,920.13 | 1,035,595,638.64 | 180.56% |
| Profits | Operating income (RMB) | 11,202,494,295.04 | 9,176,129,995.89 | 22.08% |
| Net profits attributable to shareholders of the listed Company (RMB) | 2,304,357,742.74 | 1,804,548,688.01 | 27.70% |
(2)The Company makes significant achievements in digital operations and receives explosive growth inOMO business.The Company continues to promote the in-depth matching of digital operation and the vertical integrated rapidresponse system, using the power of digital operation to seek a more efficient level with rapid response, and furtherenhance the Company’s core competitiveness based on speed economy. After the outbreak of the pandemic, thespace for digital operation substantially expands. With a well-developed smart teaching platform, online large-scaleR&D, and comprehensive service capabilities, the Company has promoted OMO products with unprecedentedintensity. It has not only achieved significant results, but also contributed to considerable growth in an extremelyunfavorable business environment. During the reporting period, the online training business achieved revenue ofRMB 2,905,456,920.13, an increase of 180.56% over the same period of last year. The proportion of online trainingrevenue in the overall revenue also increased significantly, from 11.29% in the same period of last year to 25.94%.The number of people receiving online training was close to 3 million, an increase of over 60%.
(3)Revenue of training sector for public service recruitment examinations grows steadily, and the trainingfor civil servant examinations strongly pulled the sector through the pandemic period.During the reporting period, the pandemic strongly disturbed the recruitment rhythm, and the performance of thetraining sector for public service recruitment examinations was under heavy pressure. However, the rebound of therecruitment demands is assured, especially the rebound of the recruitment demands of civil servants. In the case oftemporary passive reduction of other recruitment demands, the training for civil servant examinations has driven the
training sector for public service recruitment examinations and the Company’s overall performance to achievesteady growth.In terms of recruitment categories, civil servants recruitment category achieved revenue of RMB 6,289,564,053.54in the reporting period, an increase of 50.79% from RMB 4,171,091,369.87 in the same period of last year; publicinstitutions recruitment category achieved revenue of RMB 1,273,504,970.82 in the reporting period, a decrease of
9.12% from RMB 1,401,287,171.43 in the same period of last year; and teachers recruitment category achievedrevenue of RMB 1,794,466,441.92, a decrease of 7.15% from RMB 1,932,698,035.79 in the same period of last year.After merging other new businesses, other categories in total achieved revenue of RMB 1,781,366,252.43 in thereporting period, an increase of 10.35% from RMB 1,614,249,164.34 in the same period of last year.The pandemic has significantly disturbed the annual operation cycle, resulting in a situation where the training forrecruitment examinations in the first half of the year was half paused. In addition, the postponement of theprovincial joint entrance examination for civil servants from the first half of the year to the second half of the yeardirectly, on the one hand, affected the recruitment of teachers, public institutions employees, medical workers, etc.,and the recruitment plan for this year was shrunk or delayed; and consequently on the other hand, job seekersfocused on the preparation for civil servants recruitment in the second half of the year, and there was hardly any timefor them to take extra training for other exams as what they did in previous years, which affected the Company’senrollment in other recruitment categories to a certain extent. This situation was partially alleviated when most ofthe college students returned to school in late September.In the chaotic recruitment environment, the Company proactively carried out product innovation and enhanced itspromotion efforts. With all the challenges, it still achieved steady growth in the number of trainees in each category.The number of trainees for the civil servant recruitment increased by more than 50%, and the Company’s overalltrainee number increased by almost 40%. Although there exists a slight decline in the revenue from publicinstitutions and teachers recruitment, it has not changed the tendency of Company’s rapid expansion in related fields,nor does it mean that the trend of steady increase of recruitment demands in these fields is reversed.
2.Whether there are significant changes in core business during the reporting period
□ Applicable √ Not applicable
3.Particulars on products contributing to over 10% of the Company's main business revenueor main business profits
□ Applicable √ Not applicable
4.Whether there are seasonal or cyclical characteristics of the business requiring specialattention
□ Yes √ No
5.During the reporting period, operating income, operating costs, and total net profitattributable to ordinary shareholders of the listed Company or composition significantlychanged from the previous period
□ Applicable √ Not applicable
6.Situation of delisting
□ Applicable √ Not applicable
7.Related matters involving financial statements
(1)The explanation of the changes in accounting policies, accounting estimates and accounting methodscompared with the financial statements of the previous year
√ Applicable □ Not applicable
On July 5, 2017, the Ministry of Finance revised and issued the Accounting Standards for Business Enterprises No.14-Revenue. According to the requirements of the Ministry of Finance, such standards should be implemented onJanuary 1, 2018 for companies that are listed both at home and abroad and companies that are listed overseas andadopt International Financial Reporting Standards or Accounting Standards for Business Enterprises to preparefinancial statements; on January 1, 2020 for other domestic listed companies; and on January 1, 2021 for non-listedcompanies that implement the Accounting Standards for Business Enterprises.The Company's tenth meeting of the fifth board of directors held on March 9, 2020 approved the adoption of theAccounting Standards for Business Enterprises No. 14-Revenue (Finance Accounting [2017] No. 22) from January1, 2020. According to the cumulative impact, the amount of retained earnings at the beginning of the year and otherrelated items in the financial statements shall be adjusted, while the data in the comparable period shall not.Changes in accounting policies have no impact on the financial statements of the parent company.The implementation of this new accounting policy is not expected to have an impact on the Company's operatingresults, nor will it cause a major change in the Company's revenue recognition method, and will not have a majorimpact on the financial statements.
(2)Explanation of the situation in which the correction of major accounting errors occurs during thereporting period and needs to be retrospectively restated
□ Applicable √ Not applicable
There is no such situation of correction of major accounting errors requiring to be retrospectively restated in theCompany during the reporting period.
(3)Explanation of the changes in the scope of the consolidated statement compared with the financialstatements of the previous year
√ Applicable □ Not applicable
| Full name of subsidiary | Ratio of shareholding(%) | Reasons for changes |
| 1. Beijing Offcn Future Education Technology Co., Ltd. | 100.00 | Newly established |
| 2. Beijing Offcn Future Research Education Technology Co., Ltd. | 100.00 | Newly established |
| 3. Shaanxi Offcn Education Technology Co.,Ltd. | 100.00 | Newly established |
| 4. Chengdu Offcn Future Education Training School Co.,Ltd. | 100.00 | Newly established |
| 5. Wuhu Offcn Training School Co.,Ltd. | 100.00 | Newly established |
| 6. Wuhan Guoshang Human Resource Service Co.,Ltd. | 100.00 | Newly established |
| 7. Jinan Zhangqiu Offcn Training School Co.,Ltd. | 100.00 | Newly established |
| 8. Mengzi Offcn Education Training Co.,Ltd. | 100.00 | Newly established |
| 9. Beijing Offcn Technology Development Co.,Ltd. | 100.00 | Newly established |
| 10. Shanghai Offcn Education Technology Co.,Ltd. | 100.00 | Newly established |
| 11. Guangzhou Offcn Intelligence Education Technology Co.,Ltd. | 100.00 | Newly established |
| 12. Pingshan Offcn Education Technology Co.,Ltd. | 100.00 | Newly established |
| 13. Shandong Offcn Education Training School Co.,Ltd. | 100.00 | Newly established |
| 14. Lanzhou Offcn Education Training School Co.,Ltd. | 100.00 | Newly established |